Sanchez Energy (SN) Stock: Weak On High Volume Today

Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer.

Trade-Ideas LLC identified Sanchez Energy ( SN) as a weak on high relative volume candidate. In addition to specific proprietary factors, Trade-Ideas identified Sanchez Energy as such a stock due to the following factors:

SN has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $25.3 million.

SN has traded 351,939 shares today.

SN is trading at 4.46 times the normal volume for the stock at this time of day.

SN is trading at a new low 6.01% below yesterday's close.

'Weak on High Relative Volume' stocks are worth watching because major volume moves tend to indicate underlying activity such as material stock news, analyst downgrades, insider selling, selling from 'superinvestors,' or that hedge funds and traders are piling out of a stock ahead of a catalyst. Regardless of the impetus behind the price and volume action, when a stock moves with strength and volume it can indicate the start of a new trend on which early investors can capitalize (or avoid losses by trimming weak positions). In the event of a well-timed trading opportunity, combining technical indicators with fundamental trends and a disciplined trading methodology should help you take the first steps towards investment success.

Sanchez Energy Corporation, an independent exploration and production company, focuses on the acquisition, exploration, and development of unconventional oil and natural gas resources in the onshore U.S. Gulf Coast. Currently there are 5 analysts that rate Sanchez Energy a buy, 1 analyst rates it a sell, and 3 rate it a hold.

The average volume for Sanchez Energy has been 2.3 million shares per day over the past 30 days. Sanchez Energy has a market cap of $833.8 million and is part of the basic materials sector and energy industry. The stock has a beta of 0.63 and a short float of 35.6% with 7.82 days to cover. Shares are up 46.9% year-to-date as of the close of trading on Thursday.

TheStreet Quant Ratings rates Sanchez Energy as a sell. The company's weaknesses can be seen in multiple areas, such as its feeble growth in its earnings per share, deteriorating net income, disappointing return on equity, generally disappointing historical performance in the stock itself and generally high debt management risk.

Highlights from the ratings report include:

SANCHEZ ENERGY CORP has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. Earnings per share have declined over the last two years. We anticipate that this should continue in the coming year. During the past fiscal year, SANCHEZ ENERGY CORP swung to a loss, reporting -$1.18 versus $0.18 in the prior year. For the next year, the market is expecting a contraction of 65.3% in earnings (-$1.95 versus -$1.18).

The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Oil, Gas & Consumable Fuels industry. The net income has significantly decreased by 14536.7% when compared to the same quarter one year ago, falling from $3.45 million to -$497.35 million.

Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Oil, Gas & Consumable Fuels industry and the overall market, SANCHEZ ENERGY CORP's return on equity significantly trails that of both the industry average and the S&P 500.

Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 50.96%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 2748.38% compared to the year-earlier quarter. Naturally, the overall market trend is bound to be a significant factor. However, in one sense, the stock's sharp decline last year is a positive for future investors, making it cheaper (in proportion to its earnings over the past year) than most other stocks in its industry. But due to other concerns, we feel the stock is still not a good buy right now.

The debt-to-equity ratio is very high at 3.45 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. Regardless of the company's weak debt-to-equity ratio, SN has managed to keep a strong quick ratio of 2.07, which demonstrates the ability to cover short-term cash needs.